Home builders Toll Bros.' growth beats expectations

May 24, 2016, 8:54 AM EDT
(Source: Montgomery County Planning Commission/flickr)
(Source: Montgomery County Planning Commission/flickr)

Home builders Toll Brothers' quarterly revenue and profit beat expectations on higher home sales and prices.

Reuters reports:

Toll Brothers Inc's (TOL.N) quarterly revenue jumped nearly 31 percent, beating analysts' estimates, as the company sold more luxury homes at higher prices, mainly in California. Shares of Toll Brothers, which mostly builds single-family homes that could cost more than $2 million, rose 2 percent in premarket trading on Tuesday. New U.S. single-family home sales rose more than expected in April and the median price surged, suggesting the housing market recovery was gaining traction. Toll Brothers' orders, a key metric of future revenue for homebuilders, increased 3.2 percent to 1,993 homes in the second quarter - a period well into the spring selling season, which is to homebuilders what the holiday shopping season is to retailers. "We continue to believe the drivers are in place to sustain the current housing market's slow but steady growth," Executive Chairman Robert Toll said in a statement. "Interest rates remain low, the job picture continues to improve." Other U.S. homebuilders such as Lennar Corp (LEN.N), D.R. Horton Inc (DHI.N) and PulteGroup Inc (PHM.N) have also reported strong quarterly results due to higher home sales.

Bloomberg writes:

Net income for the three months ended April 30 was $89.1 million, or 51 cents a share, compared with $67.9 million, or 37 cents, a year earlier, the Horsham, Pennsylvania-based builder said in a statement Tuesday. The average estimate of 15 analysts was for earnings of 46 cents a share, according to data compiled by Bloomberg. The stock market has rebounded from a slide early in the year, helping to prop up demand for high-end real estate nationwide. Toll Brothers, the only large publicly traded builder focused on luxury homes, has expanded in some of the country’s priciest areas, such as California and New York City. Concern about Toll’s presence in the New York market, where high-end sales have cooled amid a surge in supply and a pullback by foreign buyers “is overdone -- it’s less than 10 percent of their revenue and California is still strong,” Megan McGrath, an analyst with MKM Holdings LLC in Stamford, Connecticut, said in a phone interview Monday. “In a growth environment, if you assume they can continue to grow, it’s pretty compelling.”

The Wall Street Journal notes:

Results in the second quarter were driven by growth in the West, including Denver, Seattle, Reno and Las Vegas. On the East Coast, the company pointed to solid results from New Jersey, Northern Virginia, Maryland and Pennsylvania. California was a weak spot for the quarter, with a decrease of 25% in units, hurt by what Chief Executive Douglas Yearley Jr. called a “temporary lack of inventory for sale.” “We believe the California market is still strong,” Mr. Yearley said. Revenue from Toll’s City Living division, which builds urban apartments, increased more than fourfold to $54 million. The segment, much smaller than Toll’s other units, represents a new segment for the company as the U.S. continues to urbanize. Backlog jumped 20% to $4.19 billion during the period as contracts rose 3%.